Asking rents have reached a record high this quarter following an ongoing trend of fewer property investors purchasing buy-to-let properties, according to Rightmove.
The average asking rent of a home outside London surpassed £800 for the first time, up to £802 per month in Q3 2018. Available stock numbers have dropped by 8.7%, amplified by a 19.4% fall in London.
According to the property portal, one reason for this lack of rental stock is the drop in new buy-to-let mortgage approvals, down 14% compared to a year ago and by 53% compared to three years ago – prior to the extra stamp duty surcharges on second homes.
Miles Shipside, commercial director and housing market analyst at Rightmove, said that due to stringent borrowing criteria, a more onerous tax regime, higher stamp duty on second homes and extra legal obligations, more and more landlords are exiting the buy-to-let market.
“What we’re left with is a lack of available homes for tenants looking to find their next place to rent, meaning that when the right kind of property does come along it isn’t sticking around for very long before it’s snapped up,” he added.
In fact, it’s now four days quicker than this time last year for a rental property to be marked ‘let agreed’ in London, down from 41 days to 37 days. However, most other regions are yet to see lower available stock convert through to a quicker time to let, with the national average of 35 days remaining the same as this time last year.
Shipside continued: “Although some of the shortfall in supply will be met by quality housing provided by Build to Rent schemes in the coming years, it’s likely stock shortages will remain in areas with a high concentration of renters.”
He advised that, given this backdrop and the strong likelihood of rents rising in the near future, private landlords should try and look beyond the current challenges if they can stay in the sector. If they work on improving the spec on their existing properties and buy better quality accommodation to add to their portfolios, tenant demand should steadily improve rental yields.
“Long term security is important too, so see if landlords are open to negotiating a longer tenancy, perhaps with inflation-only increases, as many will be keen to keep good tenants,” he said.